The new section of the Act came into force on June 17 this year.

It means that if advisers make a claim they can’t substantiate – even if it is true – they breach the law.

“If you say one product is better than another, you have to substantiate that,” David Ireland, of Kensington Swan, said. “Even if the product is actually better, if you weren’t able to substantiate it, you’d be in breach of your Fair Trading Act obligations. That’s the sting in the tail.”

Advisers could use rating agencies or research houses to help, he said.

It was something that was likely to get more regulatory attention.  Investment advisers could be caught under either the Financial Markets Conduct Act or the Fair Trading Act.

“So it is now more than just slack practice to operate more by good luck than good measure – it’s a statutory offence. In essence, with limited exceptions, if you can’t substantiate something you allege when giving advice, even if it turns out to be true and no deception was involved, you have breached the law."

He said the main exception was when a reasonable person would not expect a claim to be substantiated.

That was unlikely to apply for advisers telling clients one product was better than another.

“So when comparing products, I think it’s fair to say the law now expressly requires advisers to be able to point to a reasonable level of analysis of the products in question having been conducted, either by themselves or by someone else it was reasonable to rely upon.”